Monday, November 10, 2014

One of the main reasons for the Square-Starbucks alliance was to bolster Wallet at the coffee chain's U.S. stores. But to lock in the deal, say insiders, Square had to agree to a substantially different payment structure with Starbucks, whether charged payments were done with Wallet or not. The effect was to all but eliminate Square's margin. As outsiders praised the partnership, Square executives knew what was coming: The following year, the company would lose $25 million from Starbucks transaction costs alone (and will continue to incur losses until the contract expires next year).